Ottawa should scrap railway grain revenue cap: study

File photo of Dan Laramee walking between grain railway cars as he loads wheat from the Canadian prairies at the Pioneer grain elevator in Carseland, Alberta, October 2, 2011. REUTERS/Todd Korol

WINNIPEG, Manitoba (Reuters) - Ottawa should phase out over seven years its cap on the amount of revenue railways can earn transporting grain, a study for the Canadian government recommended on Thursday, a move long urged by railways and opposed by farmers and grain handlers.

A review of Canadian transportation laws recommended that Western Canada’s grain transportation system become more “commercially grounded.”

Canada’s two big railways, Canadian National Railway Co (CNR.TO) and Canadian Pacific Railway Ltd (CP.TO), move most of Western Canada’s wheat, canola and other crops to the United States or ports.

Ottawa implemented the grain revenue cap in 2000 after it eliminated a subsidy for grain movement by rail called the Crow Rate. The cap applies to revenue the railways earn by moving grain from the Western Canadian crop belt.

Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by James Dalgleish